The Internet Corporation for Assigned Names and Numbers (ICANN) has rejected a proposed $1.135-billion sale of the Public Interest Registry (PIR) to a private equity firm, four days before an agreed-upon deadline.
“After completing extensive due diligence, the ICANN Board finds that withholding consent of the transfer of PIR from the Internet Society (ISOC) to Ethos Capital is reasonable, and the right thing to do,” ICANN said in a blog post late Thursday night. “The public interest is better served in withholding consent as a result of various factors that create unacceptable uncertainty over the future” of the third-largest domain registry, with more than 10.5 million domain names registered.
PIR is responsible for the .org assignment and preservation of those domains. The Reston, Va.-based nonprofit announced in November that its parent organization, Internet Society (ISOC), had reached agreement with the private equity firm to acquire PIR and all of its assets from ISOC for $1.135 billion. PIR submitted a change of control and entity conversion request to ICANN, which would convert it from a nonprofit to a for-profit limited liability company (LLC). ISOC created and agreed to the transaction details that were under review.
The decision by ICANN to either approve or withhold consent of a proposed change of control had been pushed back, first from Feb. 17 to April 20, and then again to May 4, after concerns raised by the California Attorney General’s Office. ICANN is based in Los Angeles.
Among the factors in ICANN’s decision, the board said, was a change “from the fundamental public interest nature of PIR to an entity bound to serve interests of corporate shareholders, which has no meaningful plan to protect or serve the .org community.” The proposed sale also would have forced PIR to serve $360 million in debt, providing returns to shareholders, which ICANN said raised questions about how .org registrants would be protected or benefit.
There also were “additional uncertainties” around a proposed Stewardship Council that was untested and “might not be properly independent” and why PIR needs to change its corporate form to pursue new business initiatives.
“While recognizing the disappointment for some, we call upon all involved to find a healthy way forward, with a keen eye to provide the best possible support to the .org community,” ICANN said.
The Electronic Frontier Foundation (EFF) and NTEN, which launched the SaveDotOrg effort, applauded the decision in a joint statement but cautioned that it’s not the final step. They called on ICANN to open a public process for bids to find a new home for the .org domain. “ICANN has established processes and criteria that outline how to hold a reassignment process. We look forward to seeing a competitive process and are eager to support the participation in that process by the global nonprofit community,” they said in a joint statement. “The .org domain needs a secure and reliable steward that can prove it has the public and nonprofit sector’s interest at its core.”
In statements posted at keypointsabout.org, Ethos Capital, ISOC and PIR all expressed disappointment in ICANN’s decision. Ethos Capital described the decision as a “dangerous precedent” that would “suffocate innovation and deter future investment in the domain industry.” It said ICANN had overstepped its purview, “which is limited to ensuring routine transfers of indirect control, such as the sale of PIR, do not impact the registry’s security, stability and reliability.” Ethos Capital is “evaluating its options at this time.”
PIR also expressed disappointment, describing ICANN’s decision as “failure to follow its bylaws, processes, and contracts.”
The outcome seems inconsistent with prior decisions made by ICANN in similar cases, according to ISOC, and that it acted “as a regulatory body it was never meant to be, as laid out in Article 1 of its bylaws.” In a statement, ISCO said that it still stands by its decision in favor of the deal.